SEBI settlement rules set apart settlement payments from recovery of wrongful gains
Gazette-notified framework distinguishes financial obligations, stage-based calculations and a 60-day window for settling cases before a show-cause notice
The Securities and Exchange Board of India (SEBI) has introduced revised settlement framework rules, clarifying the distinction between settlement payments and the recovery of wrongful gains or losses. According to experts, this separation provides greater clarity for applicants regarding the financial implications of settlement. The SEBI (Settlement of Administrative and Civil Proceedings) Regulations 2026, recently published in the Gazette, replace the 2018 framework.
The new regulations outline the methodology for calculating settlement amounts, which may include the settlement amount itself, disgorgement of wrongful gains, losses averted or caused to investors, and remedial or regulatory requirements. Factors for calculating the settlement amount differ based on the stage of proceedings: 0.20 for voluntary, suo motu applications, 0.40 before a show-cause notice, and 0.60 after its issuance.
Moreover, a 60-day non-extendable period is introduced before a show-cause notice is issued, offering certainty and discipline. Applicants can refile their application at the same stage, paying an additional 20% of the settlement amount. Settlement amounts are credited to the Consolidated Fund of India, while disgorgement and interest are allocated to SEBI's Investor Protection and Education Fund.
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